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The chipmaking factory of the world is battling Covid and the climate crisis

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Taiwan, which accounts for more than half of global potato production, has been facing the worst drought in 50 years in months, according to an event that experts could make more frequent due to the effects of climate change.

“There is clear pressure on the semiconductor industry,” Mark Williams, Asia’s chief economist at Capital Economics, wrote Thursday in a note referring to water scarcity and coronavirus cases, along with power outages.

The environmental disaster has already posed a challenge for the island’s chip makers, including the industry leader Taiwan Semiconductor Manufacturing Company (TSM). TSMC has said it uses 156,000 tons of water a day to produce its chips, the equivalent of about 60 Olympic-sized pools.

Water is used to clean dozens of layers of metal that form a semiconductor.

“On a chip, there are many billions of transistors and we need a lot of metal layers to interconnect all the signals,” said Jefferey Chiu, an electrical engineer at Taiwan National University.

“We have to clean the surface over and over again after we finish each process,” Chiu said.

Taiwanese authorities have limited the supply of tap water to the entire island in response to the drought.

TSMC has already tried to address the shortage by transporting trucks to the water and increasing recycling rates. The company told CNN Business that production has so far not been affected.

“We have detailed response procedures to manage water scarcity at different stages,” he said. “Through our existing water conservation measures, we are able to manage the government’s current water use reduction requirements, without any impact on our operations.”

The second Baoshan Reservoir in northern Taiwan, which supplies water to TSMC and other chip makers in Hsinchu Science Park, has only about 30% of its normal water storage even after the monsoon season began. in May.

Indispensable technology

Semiconductor chips are an indispensable part of everything smartphones i cars to renters.

Super advanced chips are difficult to manufacture due to the high cost of development and the knowledge needed to manufacture them, which means that much of the production is concentrated only among a handful of suppliers.

TSMC is the world largest contract chip manufacturer, and its expensive manufacturing facilities supply many companies, including apple (AAPL), Qualcomm (QCOM) i Nvidia (NVDA)– that they can design their own chips, but do not have the necessary resources to manufacture them.

The Taiwanese company’s state-of-the-art technology has also made it a key player as the United States and China have a bitter rivalry for the development of advanced technologies of the future, such as artificial intelligence, 5G and cloud computing.

“TSMC is key to many different companies,” said Alan Priestley, vice president analyst at Gartner. “Most of the high-performance electronics you use today, such as cell phones and tablets, all of these chips are manufactured by TSMC.”

Restricted supply

The global semiconductor industry is under a lot of pressure right now. The chips have been scarcely lately, mainly due to volatile demand caused by the pandemic, US sanctions on Chinese technology companies and extreme weather. A growing number of technology companies have reported problems securing semiconductors, which analysts say could delay production or increase prices paid by consumers.

This makes it more important to contain any threat to Taiwanese production.

Aside from the drought, officials have also expressed concern about the self-governing island coronavirus outbreak, which began last month and has since become the worst since the pandemic began.
James Lee, General Manager of the Taipei Cultural and Economic Office in New York, he told Bloomberg last month that the industry could face “logistical problems” as it appealed to the United States to send vaccines to Taiwan.
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“That’s why it’s urgent,” Lee said. “We hope the international community can help release vaccines as soon as possible to help control the outbreak.”

Lee’s office rejected a request for an interview with CNN Business, citing his busy schedule.

TSMC said last month that two of its employees had been diagnosed with Covid-19, although it said operations went as usual. And Chiu, the engineer at Chengchi National University, said many companies will likely be able to mitigate the risks, as the chip-making process is highly automated and manufacturers have separated employees into groups to limit the spread of the virus. .

However, at least five semiconductor manufacturers in the southwestern capital Taipei have been forced to suspend some operations as migrant workers fall ill.

King Yuan Electronics, a leading provider of semiconductor testing and packaging services, had to suspend business for two days last weekend after more than 200 staff members tested positive, according to the Central News Agency, the source of official news from the island. All migrant workers, or about 30% of the company’s 7,000 workers, were quarantined for two weeks after a virus cluster was notified in their dormitories.

Although King Yuan said he has deployed more Taiwanese workers to its production lines, he warned that factories can only operate at a limited capacity.

April data on global semiconductor orders suggest that “capacity constraints will persist,” Williams of Capital Economics wrote last month, noting that there were many more orders than Taiwan’s exports.

“This will not continue indefinitely: semiconductor orders last month were 74% higher than the pre-pandemic, which is unsustainable,” Williams said, adding that “backlog of orders” will take a little to be erased “.

The Taiwan Semiconductor Manufacturing Company, based in Hsinchu City, northwestern Taiwan, currently produces the world's most advanced computer chips.

Long-term consequences

Experts say the problem of water scarcity, meanwhile, could get worse in the future. According to Hsu Huang-hsiung, a climate researcher at the Sinica Academy, climate change will cause less rainfall in Taiwan in the coming decades, which could lead to more frequent droughts.

“Our projections show that the drought will become more severe in the future. Therefore, this year has provided a good opportunity to test the sustainability of our semiconductor industry,” Hsu said.

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This could limit Taiwan’s advanced chip development, according to Chiu. This is because as the technology behind semiconductors becomes more sophisticated, chip makers will need more water during the chemical processes needed to make them.

Water scarcity is also not the only environmental problem at stake. Continued blackouts caused by growing demand for electricity in Taiwan have also stifled production. TSMC said even power outages affected some of its facilities.

“We need to reduce carbon dioxide emissions. But on the other hand, we need to generate more electricity,” said Hsu, who added that Taiwan’s semiconductor companies will have to invest in more renewable energy to ensure a future. sustainable.

TSMC has said it is already working to strengthen energy supply in collaboration with solar plants and wind farms across the island. Last year he said he intends to feed his production entirely through renewable energy by 2050.

– Will Ripley, Hanna Ziady, Clare Duffy and Jill Disis contributed to this report.

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